A few days ago, three committees appointed by the New Jersey Supreme Court jointly ruled that its lawyers cannot participate in Avvo’s Legal Services program because it engages in unethical fee splitting with non-lawyers.
Avvo’s Legal Services program works like this: A lawyer who signs up for the program will have a chance to be connected to a client seeking a 15-minute consultation. The client pays $39.95 to Avvo, which is deposited to the attorney’s bank account. Soon after, in a separate transaction, Avvo debits $10 from the attorney’s bank account as an “marketing fee” for that client.
Does the above make Avvo’s Legal Services program a fee-splitting scheme? Yes. You can call it a “marketing fee” or some other name that doesn’t include the words “fee split with non-lawyers.” But it does not change the fact that a lawyer is getting paid and a non-lawyer is getting a cut of that pay. And it’s not just New Jersey that thinks this way. The state bar ethics committees of Ohio, Pennsylvania, and South Carolina also ruled that this was impermissible fee splitting. I am very confident that other states will rule the same way.
Some argued that this system is no different than a credit card processing company charging a fee based on a percentage of the money received from a credit card transaction. There is a big distinction. The credit card processing company is not providing the clients. The processing company does not care whether the client is happy with the lawyer’s service. Avvo sets up a caller with an attorney. I do not know how Avvo matches up callers with attorneys, but I think it’s safe to assume that if callers are consistently unhappy with a particular attorney, that attorney will stop getting connections.
But the bigger question is whether Avvo’s service is unethical enough to justify prohibiting it. The fee-splitting prohibition was created to ensure that non-lawyers do not unduly influence a lawyer’s professional judgment. The New Jersey committees found that Avvo’s service does not. Regardless, the prohibition is clear with no exceptions.
So why is this an issue? Do state bars really want to discipline attorneys just because they split $40 for answering questions?
This ruling can create problems for people with multiple bar licenses. If an attorney is licensed to practice in New Jersey and in a state that does not prohibit participating in Avvo Legal Services, will they be subject to discipline if they participate outside of New Jersey?
But as a practical matter, I think a lot of lawyers will appreciate this service. We are less likely to have the annoying conversations with moochers who always ask, “Do you give free consultations?” Also, callers are likely to have simple questions and will manage their expectations accordingly. I don’t expect CEOs of multinational companies will be using this service to get advice on leveraged buyouts or bet-the-company litigation.
On the other hand, Avvo should allow lawyers to have more control over the service. For example, lawyers should be allowed to set their own consultation fee. As every lawyer’s experience and expertise is different, they should be allowed to set the fee as they see fit.
But programs like Avvo Legal Services might be just the beginning. The big money is in the lucrative litigation market. If Avvo were to set up a system where they can introduce catastrophic injury victims to personal injury lawyers, should Avvo get a cut of the settlement? I’m sure they would love to find a legal, ethical way to get a piece of every contingency award in the country, which can potentially be worth billions. And litigation firms may find this to be a safer investment than paying a fortune for massive advertising campaigns that may lead to nothing.
Some lawyers and bar associations might be suspicious of companies like Avvo because of their potential to disrupt the legal market. Despite the talk about improving access to justice, Avvo’s main objective is to make money. And they won’t let some regulatory prohibitions stop them, especially if they think it is outdated.
Avvo’s business model has two income sources. The first is from attorneys when they pay for their Pro advertising service. The second is from the public when they take their cut from the $39.95 consultation fee. The company is also taking advantage of market failures: clients who can’t afford or don’t want to pay an expensive attorney, and attorneys who need or want an additional income source. Talk about having your cake and eating it too.
Avvo is likely to take this on the same way Uber disrupted the taxi industry. If the service is popular enough with lawyers and consumers, then state bars may be forced to modify their ethics rules to accommodate it.
If they still can’t convince state bars to allow the service, then they might have a shot with the courts. Avvo has argued that the prohibition could be a violation of the First Amendment. There may also be potential antitrust violations.
So should Avvo’s Legal Services be considered an ethical form of fee splitting? Or is this the beginning of a grand scheme to dominate how lawyers market their practice? Right now, that is uncertain. But until someone can prove that there is potential for consumer harm and interference with a lawyer’s professional judgment, other states should hold off on issuing similar decisions.
Shannon Achimalbe was a former solo practitioner for five years before deciding to sell out and get back on the corporate ladder. Shannon can be reached by email at [email protected] and via Twitter: @ShanonAchimalbe.
